Wednesday, June 07, 2017

Trump stands tough on Mexico ahead of NAFTA renegotiation

By Robert Romano

We are still more than two months away from the much-anticipated renegotiation on NAFTA starting on August 16 by the Trump administration, but the opening round has already occurred, resulting in a June 6 settlement by the U.S. Commerce Department with Mexico over that country’s dumping of government-subsidized sugar on U.S. markets.

Under the settlement, according to the statement from Commerce Department Secretary Wilbur Ross, “We have gotten the Mexican side to agree to nearly every request made by U.S. industry to address flaws in the current system and ensure fair treatment of American sugar growers and refiners.”

The agreement increases the price at which raw and refined sugar must be sold at the mill in Mexico, from 22.25 cents per pound to 23 cents per pound and from 26 cents per pound to 28 cents per pound, respectively, excluding packaging and transportation. Also, the percent of refined sugar that may be imported to the U.S. has been reduced from 53 percent to 30 percent.

Significantly, according to the Commerce Department, the U.S. reserves the right to enforce U.S. law and institute further sanctions should the sugar dumping continue: “Mexico agreed to increased enforcement measures and to accept significant penalties for violations, including a reduction in the amount of sugar allowed to be imported equal to twice the amount of any sugar found to be in violation of the modified agreements.  In addition, Commerce can increase this reduction to three times the amount if necessary to deter further wrongdoing.”

Like any negotiation, there was give and take. In exchange, the U.S. agreed to give Mexico “a right of first refusal to supply 100 percent of any ‘additional need’ for sugar identified by USDA after April 1 of each year.” According to the department, additional need is defined as “demand for sugar in excess of the demand USDA had predicted for that crop year.”

In a statement issued by the American Sugar Alliance, the industry expressed concerns that this particular concession contained a major loophole which might enable Mexican sugar dumping to continue and is continuing talks with the administration to tighten up the language of the agreement.
Still, on the surface, the situation appears to be better than it was, validating the tough position Trump is taking on trade with Mexico — and Canada, for that matter — ahead of the NAFTA renegotiation.


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